PROJECT FENIX

AboutProject Fenix

Located in Mexico

Project Fenix is a proposed redevelopment plan for McEwen Mining’s El Gallo Complex in Mexico. Through a new Preliminary Economic Assessment (PEA) study, Project Fenix evaluates the potential extension of production in the Complex, based on a 2-phased transformation of the processing from the El Gallo mine, innovative in-pit tailings disposal, and sourcing from the El Gallo heap leach pad, El Gallo Silver, Palmarito, Carrisalejo and El Encuentro deposits.

Key outcomes of Project Fenix include a 12-year life-of-Mine (LOM) at average annual production rate of 47,000 gold equivalent (AuEq) ounces, low initial capital cost and a 28% after-tax Internal Rate of Return (IRR) at gold and silver prices of $1,250 and respectively $16 per ounce. The PEA report can be accessed here.

Mining and Processing

The Fenix Project involves a two-phase development process. The process plant would use conventional and proven mineral processing and precious metals recovery technologies.

Tailings produced during the operation would be stored in a mined-out open pit at the El Gallo Gold Mine. As part of this process, tailings deposition would include a delivery system designed to maximize tailings consolidation and water recovery.

Phase 1 includes the reprocessing of material on the gold heap leach pad at the existing El Gallo Gold Mine, with a throughput rate of 5,000 tonnes per day (tpd).

Phase 1 operation would target gold recovery from the heap leach pad material using a conventional ball grinding mill and a hybrid carbon-in-leach (CIL) circuit to recover gold onto activated carbon. Industry standard elution, electrowinning and smelting circuits would be used to produce a doré product.

Phase 2 includes the processing of open pit gold and silver mineralization from several deposits including El Gallo Silver, Palmarito, El Encuentro and Carrisalejo. Fresh mineralized material from the higher grade silver deposits (El Gallo Silver primarily) would be processed at a maximum of 3,250 tpd.

In Phase 2 the process facility would be modified to enable treatment of mineralized material from El Gallo Silver followed by other deposits in the Complex. Phase 2 operations would employ conventional flotation technology followed by intensive leaching and zinc precipitation using the Merrill Crowe process for silver and gold recovery. The CIL plant would continue to be used for leaching of the flotation tailings to maximize overall silver recoveries. Phase 2 would also use the existing three stage crushing plant to prepare material for delivery to the grinding circuit.

The proposed process plant and the El Gallo Silver deposit are separated by about 6.5 km; requiring construction of a dedicated haul road for the transport of mineralized material. A new substation and power line would connect both projects to the national electrical grid.

PRODUCTION SUMMARY

Over the mine life, production would total 17.2 million tonnes of mineralized material at 1.20 g/t AuEq average head grade, containing 667 K oz AuEq, and recovering a total of 563 K oz AuEq.

Source

Gold Grade (G/T)

Silver Grade (G/T)

Production Model(Ktonnes)

Strip Ratio

Contained Metal (Koz AuEq)

Recovered Metal (Koz AuEq)

El Gallo Heap Leach Pad

0.64

0

9,024

N/A

185

163

El Gallo Silver

0.11

117.2

5,413

3.8

291

249

Palmarito

0.37

149.9

1,796

3.1

137

105

Carrisalejo

0.60

95.0

263

5.6

16

13

El Encuentro

1.56

2.2

737

7.7

38

34

Totals

17,233

N/A

667

563

FUTURE WORK AT FENIX

The current operation at the El Gallo Gold Mine is a fully permitted open pit mine with a heap leach and ADR process facilities. El Gallo Silver and Palmarito are fully permitted for the construction of a CIL mill and drystack tailings facility. Some amendments to the permits are required for Project Fenix.

Phase 1 requires amendment of the current permits to include the construction of a mill and leach circuit at the location of the existing El Gallo Gold Mine for the reprocessing of the heap leach pad material. The permit amendment will also include the backfilling of the Samaniego pit with mill tailings as part of an integrated concurrent closure plan for the El Gallo Gold Mine. Phase 2 permitting will require authorization to augment the tailings volume to be stored in the Samaniego pit, and El Gallo Silver permits require amendments to change the processing location to El Gallo Gold.

The Fenix Project has Comision Nacional del Agua(CONAGUA) approval for the extraction of groundwater and for the construction of wells. Advancing the project will require permit amendments and approval by the Federal Environmental Authority (SEMARNAT) for Phase 1 and subsequently for Phase 2.

The Company seeks to obtain approval of the Phase 1 El Gallo permit modifications by during the first half of 2019 and Phase 2 approvals in the second half of 2019, with further project advancement subject to permit approvals.

Preliminary metallurgical test work conducted in 2018 indicated that the El Gallo Gold heap leach pad material would be amenable to direct cyanidation following conventional grinding. Test work identified moderate levels of soluble copper and zinc.

From 2010 to 2016 extensive metallurgical test work has been conducted on samples from the El Gallo Silver deposit using a direct cyanidation flow sheet. From 2017 to 2018 metallurgical test work has been focused on using conventional flotation techniques to separate the slower leaching minerals to enable separate cyanide leaching of bulk flotation concentrate and flotation tailings streams with tailored leach conditions to reduce overall size of the leaching circuit.

Results have proved favorable and a flowsheet incorporating bulk flotation and separate leaching of bulk flotation concentrates and tailings for treatment of El Gallo Silver has been adopted.

Historical test work records have been utilized to gain a preliminary understanding of the remaining resources along with some scoping test work conducted in 2018 to determine how material from the other higher-grade gold and silver deposits included in the conceptual production schedule would respond to the selected flowsheet.

LOM RECOVERIES FOR THE PRODUCTION MODEL

RESOURCE AREA

LOM Gold Recovery

LOM Silver Recovery

El Gallo Heap Leach Pad

88%

-

El Gallo Silver

75%

86%

Palmarito

85%

75%

Carrisalejo

75%

85%

El Encuentro

90%

65%

Results from the scoping tests indicate that the Carrisalejo material will likely perform similarly to El Gallo Silver with respect to silver recovery. Scoping test results showed only modest silver recovery from flotation for the Palmarito sample. However, separate cyanide leaching of the bulk flotation concentrates and flotation tailings streams achieved positive results. The treatment process for Palmarito and Carrisalejo open pit material has therefore been assumed to be similar to El Gallo Silver pending confirmation through additional sampling and metallurgical test work.

For the PEA metallurgical samples selected for testing were assumed to be representative. Note that the Palmarito, Carrisalejo and El Encuentro deposits included in the production schedule have only been subjected to scoping level metallurgical test work using the selected process flowsheet. Further sampling and test work is required to better understand the response of each of the deposits to the selected flowsheet.

Further Potential at Fenix

The Company believes there are opportunities to further improve the economics of the Fenix Project through continued testing and trade-off studies that will be continued throughout 2018.

Capital cost estimates for the project are to a level of accuracy that is consistent with a PEA technical report. During the 14 months following the July 2018 filing of the PEA, we will continue to review mineral processing, mine sequencing, material transportation and tailings storage options; and the flow sheet will be optimized by undertaking trade-off studies, updating cost models and additional metallurgical testwork.

In recent years, exploration efforts at the El Gallo Complex have focused on both near-mine and property-wide targets. Near-mine drilling efforts have been successful in delineating and extending mineralization near the Samaniego and Sagrado Corazon pits. The new gold mineralization generally contains sulfides that could be processed in the Phase 2 process plant. At the property scale significant mineralization has been confirmed at the El Encuentro zone, which is located 10 km from the El Gallo Gold Mine.

A property-wide soil geochemical survey was completed in early 2018 and results indicate the potential for extensions of known zones of sulfide mineralization. Multiple additional targets were identified from the survey, and their field evaluation and ranking for drill testing is in progress.